12/07

In December of 2007, the S&P 500 stood just 3 percent below an all-time high hit two months before. The announced U.S. unemployment rate was relatively stable at 4.7 percent. U.S. real GDP growth in the previous two quarters had been a healthy +3.8 percent and +3.9 percent, respectively. The media was upbeat about consumer spending for the holiday shopping season, and U.S. average home prices were still near an all-time high.

One full year later, in December of 2008, the National Bureau of Economic Research officially announced that a U.S. recession had begun in December of the previous year: 12/07.

6/09

In June of 2009, the U.S. stock market and economy were reeling. The S&P 500 had lost more than 40 percent from its 2007 peak, and many investors had given up hope of recouping losses. In the previous two quarters, real GDP had been reported at -3.8 percent and -6.1 percent, respectively. Consumers were downbeat, home prices were plummeting, and the unemployment rate had soared to 9.4 percent. To many Americans, it felt like the permanent end of prosperity.

15 full months later, in September of 2010, the NBER officially announced that an expansion had begun in June of the previous year: 6/09. By that time, the stock market had begun rallying to all-time highs.

Investors who really suffered most in the last recession were those who waited for the officials (the NBER) to call the game.

On the other hand, those who listened to good planning advice and prepared for potential changes ahead of the crowd were able to mitigate losses in the downturn and participate in the rally that followed. You can find NBER’s official record of all U.S. business cycles since 1854 here: www.nber.org/cycles/sept2010.html

It’s a valuable tool for helping clients anticipate changes and make timely planning decisions.